I Earn $100,000 a Year. What's a Reasonable IRA Balance to Aim For?

Saving for retirement is important. If you don't enter your senior years with a solid nest egg, you might have a hard time paying your expenses. That's why it's essential to fund an IRA consistently for as long as you can.

If you earn $100,000 a year, you're likely in a stronger position to make large contributions than someone earning, say, $40,000 a year. But what contributions are reasonable? And what sort of balance is realistic at the end of your savings window?

You could end up a retirement millionaire

Some financial experts will tell you to aim to save 15% to 20% of your income for retirement. That's a tall order, though. Even if you earn a nice salary, it's hard to part with that much money.

Maxing out your IRA, however, may be doable if you earn $100,000. Right now, IRAs max out at $6,500 a year if you're under 50.

Let's say you're 32 years old with a $100,000 salary but you haven't started funding your IRA yet. Maybe you were focused on first building an emergency fund and saving up a home down payment.

Let's also assume you invest your IRA heavily in stocks. The stock market's average over the past 50 years has been 10% a year, as measured by the S&P 500 index. So if you set aside $6,500 a year in your IRA over 35 years, you could end up with a balance of about $1.76 million if you score that same 10% return. That could make for a very comfortable retirement.

You may not be able to save so much

It's often the case (though not always) that people who earn a high income do so by living in an expensive area so they have access to jobs with generous salaries. RentHop reports that the average monthly rent for a studio apartment in New York City is $3,450. If you're spending over $41,000 a year on rent alone, you may not be able to save $6,500 a year.

So let's be more realistic and say you're able to save $250 a month, or $3,000 a year. That's only 3% of your income, but in a high-cost city, that may be all you can swing.

In that case, if we assume the same average annual 10% return and 35-year savings window as above, you're looking at an IRA balance of about $813,000. That's not a multimillion-dollar nest egg, but it's also a nice sum of money for retirement.

Just because you earn $100,000 a year doesn't mean you can afford to max out your IRA. If that's not the case, don't beat yourself up. Just do the best you can to save as much as you can. If you start at a fairly young age, with the right investments, you can grow your balance quite nicely.